Bloomberg Businessweek June 16, 2020 pp22-23. “The Little Canadian Company Powering Online Shopping” “Shopify powers more than 1 million merchants globally. Its shares have almost doubled this year, adding to its founder’s fortune”. “THE BOTTOMLINE Shopify is only 14 years old, and its already taking on Amazon. Does it have staying power, or is it just too good a story?”.
39YO CEO Tobi Lutke started in the ecommerce business in 2004 trying to sell snowboards online but discovered that off-the-shelf software was “incredibly expensive, unnecessarily complex, and infuriatingly inflexible”. “He wrote … better code himself” soon realizing software was more valuable than snow gear. Fast forward, Shopify “has become the platform of choice for businesses seeking to get online quickly and cheaply. A monthly fee starting at $29 buys a virtual shop and all that’s needed to run it, including e-tools required to manage…payments,…inventory,…and shipping”. If you didn’t make your online purchase with Amazon you probably bought from a company using the Shopify platform. Besides Heinz, Heineken, and PepsiCo “more than 1 million merchants over 175 countries…” used Shopify selling “$61B of goods in 2019.”
COVID-19 pandemic helped create “a 62% surge in store creations over a six-week period” starting in April. Being the platform of so many companies creates a living database of what’s selling and what marketing is working. Having access to these data has proved helpful to subscribed businesses.
With a nearly doubling of SHOP stock price YTD in 2020 its market capitalization at $88B now exceeds that of “Target, Uber Technologies or General Electric”. Gus Papageorgiou, PI Financial Corp. Toronto, states “Its competitive position is unassailable, the market is almost immeasurable, and the business model is highly compelling”. Also noted “online spending accounted for just 16% of U.S. retail sales in 2019”. Is SHOP priced like a bubble ready to burst? Pricing when the article was written was 40 times revenue for a company that has only once realized a profit.